Working Papers, Department of Economics, Lund University
Assigning Economic Policy and Business Cycle Shocks to Democrats and Republicans: A Common Trends Approach
Abstract: We estimate a so called common trends model of federal
taxes and spending in the U.S.. Using dates on presidential terms as well
as the NBER business cycle, we are able to interpret the estimated
permanent shock as being of structural policy origin and the transitory
shock as being of (to politicians) exogenous business cycle origin. Apart
from strong partisan effects, we find that Republicans attempts to reduce
the public sector during the first half of the term and that Republicans
also have been unlucky to have been in office during the major part of the
negative (exogenous) business cycle shocks.
Keywords: Fiscal policy; Democrats; Republicans; Partisan differences; Common Trends; (follow links to similar papers)
JEL-Codes: C32; E61; H11; (follow links to similar papers)
24 pages, November 16, 2001
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